The Hunt for Value Starts in Chelsea

Postcodes within prime central London rarely go out of style. They do, however, go out of favor

Chelsea has suffered a hit, as its main supply of buyers — who work in the City as investment bankers and fund managers — cut back on property purchases. As bonuses were cut, Chelsea felt the pinch. Knight Frank, the estate agency, has recorded that, while average sales across prime central London fell by 19.5% in the first half of 2015 compared with the year before, the fall was felt most acutely in Chelsea, where the rate was 37 per cent. In the £10 million-plus super-prime market, Chelsea accounted for 3 per cent of all London deals in 2015, down from 10 per cent in 2012.

However, a new market report suggests Chelsea is coming back into favour, because of a narrowing price gap with other London markets and improved infrastructure.

James Pace, head of Knight Frank’s Chelsea office, says: “The groundwork is laid for the revival of the residential market. We have had a number of viewings since the beginning of the year and are expecting stock to shift after half-term, as is typical at this time of year.”

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Chelsea, particularly its western side, is predominantly a market of houses rather than flats. However, new developments are attracting the attention of existing residents.
Pace says: “The next phase of the Chelsea Waterfront is due to launch in the next month or so. While Battersea Power Station gets volumes of attention, this is actually in a far better location.”

The King’s Library on Hortensia Road, a listed former Edwardian school, is being converted into 18 apartments. At the end of this year, The Glebe — another old school — is to launch, offering villa-style properties. Each resident of The Glebe will have their own swimming pool and private lift.

Chelsea has had to contend with the fact that nearby markets in southwest London, including Battersea, Wandsworth and Fulham, are more affordable. Average prices in Chelsea are between £1,600 and £2,200 per square foot, compared with £850 to £1,200 in neighboring Fulham. However, the price gap between Chelsea and other prime areas is closing, which means it is no longer quite so expensive, relatively speaking, and interest is escalating.

King’s Road Maurice Rougemont/Getty Images

Pace says: “As prices north of Hyde Park and south of the River Thames catch up, demand in Chelsea is likely to grow. A possible Crossrail 2 station in Chelsea would enhance connectivity and may spur investment from leading landowners, including the Cadogan Estate and the Sloane Stanley Estate.”

Properties to the north of Hyde Park, an areas that includes Bayswater, Paddington and Queensway, haven’t experienced the same level of demand as some of the world-famous property markets farther south. The result is that residential prices grew by 27 per cent less than in postcodes adjoining Hyde Park, including W8, SW7 and W1K, in the ten years to June 2015.

Knight Frank says that, in the 12 months to December 2015, prices in the Hyde Park Estate fell by 1.8 per cent. Despite a more recent spurt of growth, this historic underperformance means there remains strong potential for the residential market north of Hyde Park. Fenella Freeland, head of Knight Frank’s Hyde park office, says: “The area’s centrality and high-quality schools mean it attracts a range of buyers and tenants. Cost-conscious companies typically prefer the value it provides versus other prime central London rental markets.” Furthermore, a high-quality development pipeline is expected to drive demand. For example, this spring the Hempel Collection is due to launch its second phase, Hempel Gardens. The residents of the 18 high-tech homes hidden behind restored Bayswater stucco façades will have access to their own exclusive garden square.

Paddington is undergoing a significant revival, accelerated by the arrival of a Crossrail station in 2018, which will make it 10 minutes from Liverpool Street and 23 minutes from Heathrow airport.

Blue-chip companies including Marks and Spencer, Rio Tinto and AstraZeneca have relocated to the Paddington Basin area, and the “Shard of west London” is planned as the centrepiece of its regeneration. Freeland says: “As the prime central London property market overcomes a period of short-term uncertainty, Hyde Park’s comparative affordability, wider regeneration story and high-quality development pipeline form a sound basis for price growth.”